Distribuzione Elettrica Adriatica (BIT:DEA) Is Looking To Continue Growing Its Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at Distribuzione Elettrica Adriatica (BIT:DEA) so let's look a bit deeper.

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Return On Capital Employed (ROCE): What Is It?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Distribuzione Elettrica Adriatica, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.082 = €8.7m ÷ (€131m - €25m) (Based on the trailing twelve months to December 2024).

So, Distribuzione Elettrica Adriatica has an ROCE of 8.2%. On its own that's a low return on capital but it's in line with the industry's average returns of 7.9%.

See our latest analysis for Distribuzione Elettrica Adriatica

In the above chart we have measured Distribuzione Elettrica Adriatica's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Distribuzione Elettrica Adriatica for free.

What Can We Tell From Distribuzione Elettrica Adriatica's ROCE Trend?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last one year, returns on capital employed have risen substantially to 8.2%. Basically the business is earning more per dollar of capital invested and in addition to that, 74% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line On Distribuzione Elettrica Adriatica's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Distribuzione Elettrica Adriatica has. Astute investors may have an opportunity here because the stock has declined 17% in the last year. So researching this company further and determining whether or not these trends will continue seems justified.

If you want to continue researching Distribuzione Elettrica Adriatica, you might be interested to know about the 2 warning signs that our analysis has discovered.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.